Federal endorsement granted for SouthState's autonomous business agreement
The Federal Reserve has given its approval for the acquisition of Independent Bank Group by SouthState, a bank based in Winter Haven, Florida and McKinney, Texas. This merger, valued at approximately $2 billion, will create the 46th-largest bank in the U.S., with about $65.1 billion in assets and $52.9 billion in deposits.
The deal, expected to close in the first quarter of 2025, will see SouthState expand its presence in key regions such as the Dallas/Fort Worth, Austin, Houston areas in Texas, and the Denver, Colorado Springs, Fort Collins areas in Colorado. Three Independent Bank Group directors will join the boards of both SouthState Corp. and the bank once the deal closes.
The approval process for banking mergers and acquisitions is anticipated to speed up under a potential return of Donald Trump to the presidency. This is due to the rescinding of Biden-era merger review guidance, which had imposed more stringent conditions, leading to less restrictive and quicker reviews. The rollback of these rules by bank regulators and the DOJ has restored a more favorable regulatory environment for bank mergers.
The allegations against Independent are based on outdated Community Reinvestment Act performance evaluations, according to SouthState. The Federal Deposit Insurance Corp. did not identify any discriminatory or illegal credit practices at Independent Bank, SouthState said. However, two comments were made against the acquisition, both expressing fair lending concerns.
Independent has submitted an application to open a branch in south Dallas in a ZIP code identified as an area with a significant nonwhite population. The bank has also refuted allegations that it made fewer home loans to Black potential borrowers as compared to white ones in certain states.
In a separate development, the Fed has also approved Canadian lender Scotiabank's application to increase its stake in Cleveland-based KeyBank to up to 14.99%.
Piper Sandler analyst Mark Fitzgibbon predicted that merger-and-acquisition approvals would "speed up markedly" with Donald Trump's pending return to the presidency. Robust bank M&A activity may continue due to "tremendous pent-up demand," according to Fitzgibbon.
However, it's important to note that the Justice Department found that a combination between SouthState and Independent would not have a significantly adverse effect on competition or on the concentration of resources in any relevant banking market.
The deal's closing is subject to regulatory approvals and other customary closing conditions. SouthState was unable to confirm many of the statistics cited by the first commenter, stating that Home Mortgage Disclosure Act data do not reflect the full record of its home lending and refinancing activities. A second commenter alleged that Independent engaged in redlining in southern Dallas from 2010 to 2020 and is failing to address the needs of low- to middle-income residents there.
This merger is a significant development in the banking sector, signalling a potential trend towards consolidation under a more favourable regulatory environment. As always, these transactions will be closely watched for their impact on competition, community development, and access to credit.
References: 1. Banking Dive 2. American Banker 3. Bloomberg
- The merger between SouthState and Independent Bank Group, approved by the Federal Reserve, marks a notable event in the banking-and-insurance industry, as it creates the 46th-largest bank in the U.S. and may stimulate further business and finance consolidation under a more favorable regulatory setup.
- The approval for Canadian lender Scotiabank to increase its stake in KeyBank, another significant development, highlights the ongoing activity in the finance sector, which is anticipated to accelerate further due to the pending return of Donald Trump as president and increased merger-and-acquisition activity.
